nep-gro New Economics Papers
on Economic Growth
Issue of 2016‒02‒17
eighteen papers chosen by
Marc Klemp
Brown University

  1. Desire and Development By Strulik, Holger
  2. A dissimilarity-adjusted index of ethnic diversity: Measurement and implications for findings on conflict, growth and trade By Philipp Kolo
  3. The Role of Economic Geography in Subnational African Development By Seiffert, Sebastian
  4. Natural Disasters and Macroeconomic Performance: The Role of Residential Investment By Trimborn, Timo; Strulik, Holger
  5. Immigration, Human Capital Formation and Endogenous Economic Growth By Ehrlich, Isaac; Kim, Jinyoung
  6. Science, Innovation and National Growth By Brenner, Thomas
  8. What is driving the African Growth Miracle ? By Harttgen, Kenneth; McMillan, Margaret
  9. Talent Allocation, Financial Intermediation and Growth: Evidence and Theory By Khabibulina, Liliya; Hefti, Andreas
  10. Aid and growth. New evidence using an excludable instrument By Langlotz, Sarah; Dreher, Axel
  11. Extending the Ramsey Equation further: Discounting under Mutually Utility Independent and Recursive Preferences By Hector, Svenja
  12. The Evolution of Gender Gaps in Industrialized Countries By Olivetti, Claudia; Petrongolo, Barbara
  13. Gender Discrimination and Common Property Resources By Casari, Marco; Lisciandra, Maurizio
  14. The strong Porter Hypothesis in an endegenous growth model with satisficing managers By Dominique Bianco; Evens Salies
  15. Public education and R&D-based economic growth By Werner, Katharina; Prettner, Klaus
  17. A Two Sector Endogenous Growth Model with Two Accumulating Factors- Implementing Trade By Kirschbaum, Birgit
  18. Does Public Education Expansion Lead to Trickle-Down Growth? By Böhm, Sebastian; Grossmann, Volker; Steger, Thomas

  1. By: Strulik, Holger
    Abstract: This paper sets up a unified growth model and explores the impact of gender differences in the desire for sex and the distribution of power in the household for the onset of the demographic transition and the take-off to growth. Depending on the price and efficacy of modern contraceptives, the gender wage gap, and female bargaining power the model assumes one of two possible solutions. At the traditional equilibrium, contraceptives are not used, fertility is high and education and growth are low. At the modern equilibrium, contraceptives are used, fertility is low and further declining with increasing income, and education and growth are high. The theory motivates an endogenous preference reversal. At the traditional equilibrium (i.e. in poor economies) men want to have more children than women whereas at the modern equilibrium (in developed economies) men prefer fewer children than women. Female empowerment leads to lower fertility and more education at the traditional equilibrium and to an earlier onset of the demographic transition and the take-off to modern growth.
    JEL: O40 I25 J10
    Date: 2015
  2. By: Philipp Kolo (Georg-August University Göttingen)
    Abstract: Existing indices of ethnic diversity are generally based on pre-defined groups, disregarding the (dis)similarities between them. This paper proposes an index that includes the dissimilarity in language, ethno-racial characteristcs and religion between groups. The resulting distance-adjusted ethno-linguistic fractionalization index (DELF) is based on highly disaggregated data on the language, ethnic and religious composition of groups and allows an assessment of differentiation between groups within and across countries. The DELF is subsequently applied by replicating some key studies on the effects of ethnic heterogeneity on economic outcomes. The results confirm the generally found growth-reducing effect of ethnic heterogeneity but also shows that this does not hold true for ethnic diversity in more developed countries. As regards the cultural distance between countries and its impact on trade, the DELF is, indeed, a very valuable measure of cultural affinity between countries, also showing this affinity affects trade flows in a positive way, especially of heterogenous goods.
    Keywords: Composite Index; Conflict; Distance; Ethno-Linguistic Fractionalization (ELF); Growth; Trade
    JEL: C43 D63 D74 F15 O10 Z10
    Date: 2016–01–27
  3. By: Seiffert, Sebastian
    Abstract: This contribution investigates the role spatial agglomeration of economic in explaining difference in comparative development of the African hinterland. In order to overcome the paucity with regards to disaggregated data concerning economic activity as well its spatial distribution, this approach relies on geo-referenced satellite data. Using information about the intensity of nocturnal lights at a spatial resolution of one square kilometre, it integrates the fields of spatial economics and the research concerning the fundamental causes of economic growth. It is shown that introducing measures of spatial dispersion in economic activity can help explaining a considerable amount of unobserved heterogeneity. I show that higher levels of spatial agglomeration are associated with significantly higher levels of local development in the African hinterland. These findings are robust to controlling for both national legal institutions as well as unobservable cross-ethnicity differences.
    JEL: O10 O40 R12
    Date: 2015
  4. By: Trimborn, Timo; Strulik, Holger
    Abstract: Recent empirical research has shown that income per capita in the aftermath of natural disasters is not necessarily lower than before the event. In many cases, income is not significantly affected and surprisingly, can even respond positively to natural disasters. Here, we propose a simple theory based on the neoclassical growth model that explains these observations. Specifically, we show that GDP is driven above its pre-shock level when natural disasters destroy predominantly residential housing (or other durable goods). Disasters destroying mainly productive capital, in contrast, are predicted to reduce GDP. Insignificant responses of GDP can be expected when disasters destroy about equally residential structures and productive capital. We also show that disasters, irrespective of whether their impact on GDP is positive, negative, or insignificant, entail considerable losses of aggregate welfare.
    JEL: E20 O40 R31
    Date: 2015
  5. By: Ehrlich, Isaac (University at Buffalo, SUNY); Kim, Jinyoung (Korea University)
    Abstract: Census data from international sources covering 77% of the world's migrant population indicate that the skill composition of migrants in major destination countries, including the US, has been rising over the last four decades. Moreover, the population share of skilled migrants has been approaching or exceeding that of skilled natives. We offer theoretical propositions and empirical tests consistent with these trends via a general-equilibrium model of endogenous growth where human capital, population, income growth and distribution, and migration trends are endogenous. We derive new insights about the impact of migration on long-term income growth and distribution, and the net benefits to natives in both destination and source countries.
    Keywords: immigration, human capital formation, endogenous economic growth, migrants, natives, population, long-term income
    JEL: F22 F43 O15 O4
    Date: 2015–12
  6. By: Brenner, Thomas
    Abstract: This paper studies the effects of public research (publications) and innovation output (patents) on national economic growth with the help of a GMM panel regression including 114 countries. Effects on productivity growth and capital and labor inputs are distinguished. Furthermore, different time lags are examined for the various analyzed effects and two time periods as well as less and more developed countries are studied separately. The results confirm the effect of innovation output on productivity for more developed countries. Simultaneously, innovation output is found to have negative impacts on capital and labor inputs, while public research is found to have positive impacts on labor inputs.
    JEL: O11 O31 C23
    Date: 2015
  7. By: Stijepic, Denis; Wagner, Helmut
    Abstract: Recent literature studies structural change and aggregate dynamics in neoclassical multi-sector growth models. A central aspect of this literature is the explanation of Kaldor-Kuznets-stylized-facts , which state that massive structural change takes place while aggregate-dynamics are relatively stable in the long-run. We present a growth model analysing the role of government in structural change and aggregate growth. We show that, besides distortionary effects on the sector structure, the provision of government services has an impact on the intertemporal elasticity of substitution of the representative household and, thus, on aggregate dynamics. These results can be used to explain the Kaldor-Kuznets-facts.
    JEL: O41 O38 O14
    Date: 2015
  8. By: Harttgen, Kenneth; McMillan, Margaret
    Abstract: We show that much of Africa s recent growth and poverty reduction can be traced to a substantive decline in the share of the labor force engaged in agriculture. This decline has been accompanied by a systematic increase in the productivity of the labor force, as it has moved from low productivity agriculture to higher productivity manufacturing and services. These declines have been more rapid in countries where the initial share of the labor force engaged in agriculture is the highest and where commodity price increases have been accompanied by improvements in the quality of governance.
    JEL: O13 O40 Q16
    Date: 2015
  9. By: Khabibulina, Liliya; Hefti, Andreas
    Abstract: In this paper we study the relationship between intersectoral wage inequality and economic growth. In the empirical part of the paper, we find a negative correlation of relative wages in the financial sector with respect to manufacturing sector with subsequent economic growth in case of the U.S. states from 1977 to 2011. We show that the result is robust to different standard estimation techniques and control variables. A similar while somewhat less robust result applies to the case of relative sector sizes as measured by the labor force. In the theoretical part we aim at constructing a tractable general equilibrium model of financial intermediation, entrepreneurship and growth with an imperfect labor market, that helps to explain the observed empirical regularities.
    JEL: J24 J31 O41
    Date: 2015
  10. By: Langlotz, Sarah; Dreher, Axel
    Abstract: We use an excludable instrument to test the effect of foreign aid on economic growth, in a sample of 73 countries over the 1966-2009 period. We interact donors legislature fractionalization with a recipient country s probability to receive aid. The results show fractionalization to increase donors aid budgets, representing the over-time variation of our instrument, while the probability to receive aid introduces variation across recipient countries. Controlling for country- and period-specific effects that absorb the levels of the interacted variables, the interaction provides a powerful and excludable instrument. Making use of this instrument, our results show that aid increases growth.
    JEL: O19 O11 F35
    Date: 2015
  11. By: Hector, Svenja
    Abstract: I revisit the consumption discount rate for a novel combination of standard assumptions. To disentangle risk and time preferences, I consider a decision maker with recursive preferences la Kreps and Porteus (1978). Moreover I assume that preferences are mutually utility independent in the sense of Koopmans (1960). In an in finite horizon setting with independent growth risk and constant elasticity of substitution, the consumption discount rate is diminished by a previously unrecognised horizon effect. This effect may be signifi cant if the rate of pure time preference is moderately small.
    JEL: H43 D81 D90
    Date: 2015
  12. By: Olivetti, Claudia (Boston College); Petrongolo, Barbara (Queen Mary, University of London)
    Abstract: Women in developed economies have made major inroads in labor markets throughout the past century, but remaining gender differences in pay and employment seem remarkably persistent. This paper documents long-run trends in female employment, working hours and relative wages for a wide cross-section of developed economies. It reviews existing work on the factors driving gender convergence, and novel perspectives on remaining gender gaps. The paper finally emphasizes the interplay between gender trends and the evolution of the industry structure. Based on a shift-share decomposition, it shows that the growth in the service share can explain at least half of the overall variation in female hours, both over time and across countries.
    Keywords: female employment, gender gaps, demand and supply, industry structure
    JEL: E24 J16 J31
    Date: 2016–01
  13. By: Casari, Marco (University of Bologna); Lisciandra, Maurizio (University of Messina)
    Abstract: In an open economy with common property resources at the community level, marriage and migratory decisions crucially depend on inheritance rules on the commons. Motivated by the traditional management of the commons in the Italian Alps, we present a model that fits the evolution of property rights observed over six centuries. Women's rights over the commons were progressively eroded from the Middle Ages until 1800, when there was an almost universal adoption of a patrilineal inheritance system. Communities switched from an egalitarian system to a patrilineal inheritance system in an attempt to protect the per capita endowment of common resources from outside immigration. The model shows that inheritance rules have clear-cut implications for marriage strategies, migratory flows, and fertility rates.
    Keywords: inheritance, commons, migration, institutions, property rights
    JEL: J13 J16 Q24
    Date: 2015–12
  14. By: Dominique Bianco (Université de Bologne, LEDI (CNRS)); Evens Salies (OFCE-SciencesPo)
    Abstract: Few endogenous growth models have focused attention on the strong Porter hypothesis, that stricter environmental policies induce innovations, the benefits ofwhich exceed the costs. A key assumption in this hypothesis is that policy strictness pushes rms to overcome some obstacles to profit maximization. We model this hypothesis by incorporating pollution and taxation in the Aghion and Grifith (2005) analysis of growth with satisficing managers. Our theoretical results predict the strong Porter hypothesis. Moreover, they suggest that the stringency of environmental policy should adjust to changes in the level of potential competition in the intermediate inputs sector
    Keywords: Strong Porter Hypothesis, Environmental Policy, Endogenous Growth
    JEL: D43 O31 O41 O44
    Date: 2016–01
  15. By: Werner, Katharina; Prettner, Klaus
    Abstract: We analyze the short- and long-run effects of public education on economic growth and welfare. In so doing, we extend an R&D-based economic growth model by including a governmental sector that levies labor income taxes and uses the proceeds to finance teachers. An increase in the tax rate reduces consumption possibilities (and thereby individual utility), and the number of workers available for final goods production and research. At the same time, however, it increases the educational resources available per pupil. Consequently, economic growth slows down immediately after an increase in educational investments but it speeds up during the transition toward the long-run balanced growth path. Altogether, this implies a dynamic tradeoff in the sense that current cohorts loose due to educational reform, whereas future cohorts gain. We show that there exists an interior welfare-maximizing level of the provision of public education for each time horizon and show that it is higher than the levels we typically observe in industrialized countries. Since the transitional effects of an education reform on growth and welfare can be negative, our framework has the potential to explain resistance against long-run welfare improving education reforms.
    JEL: I25 J24 O31
    Date: 2015
  16. By: Irmen, Andreas
    Abstract: Uzawa s steady-state growth theorem (Uzawa (1961)) is generalized to a neoclassical economy that uses current output, e.g., to create technical progress or to manufacture intermediates. The difference between aggregate final-good production and these resources is referred to as net output. The new generalized steady-state growth theorem holds since net output exhibits constant returns to scale in capital and labor. This insight provides an understanding for why technical change is labor-augmenting in steady state even if capital-augmenting technical change is feasible. By example, this point is made for four growth models that allow for endogenous capital- and labor-augmenting technical change, namely, Irmen and Tabakovic (2015), Acemoglu (2003), Acemoglu (2009), Chapter 15, and for the typical model of the induced innovations literature of the 1960s. The reduced form of these models is shown to be consistent with the generalized steady-state growth theorem.
    JEL: E10 O10 O40
    Date: 2015
  17. By: Kirschbaum, Birgit
    Abstract: This paper is about trade in an endogenous growth model with accumulation of physical and human capital. The convergence to the ray of steady states is proved for two different development stages of similar small countries. Free trade benefits the education sector of a relatively less developed country and thus stimulates the human capital accumulation. Whereas a technological more developed country declines in favour of the world market.\\ Only if the small country is relatively less developed then there is a convergence to the balanced growth path of the world market and the country improves its situation. Without any trade policy a less developed country will lose necessary factors of production. A more developed country deals with stagnation or even fluctuation of its development stage.
    JEL: O11 F19 D51
    Date: 2015
  18. By: Böhm, Sebastian; Grossmann, Volker; Steger, Thomas
    Abstract: The paper revisits the debate on trickle-down growth in view of the widely discussed evolution of the earnings and income distribution that followed a massive expansion of higher education. We propose a dynamic general equilibrium model to dynamically evaluate whether economic growth triggered by an increase in public education expenditure on behalf of those with high learning ability eventually trickles down to low-ability workers and serves them better than redistributive transfers. Our results suggest that, in the shorter run, low-skilled workers lose. They are better off from promoting equally sized redistributive transfers. In the longer run, however, low-skilled workers eventually benefit more from the education policy. Interestingly, although the expansion of education leads to sustained increases in the skill premium, income inequality follows an inverted U-shaped evolution.
    JEL: H20 J31 O30
    Date: 2015

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